IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

The Last Word on the Wage Curve?

  • Peter Nijkamp
  • Jacques Poot

Since 1990, there has been extensive international research on the responsiveness of wages of individuals to changing local labour market conditions. For many countries, an inverse relationship between wages and local unemployment rates has been found. In their book, The Wage Curve, Blanchflower and Oswald argued that the unemployment elasticity of pay is around - 0.1 in most countries. In a 1995 literature survey, Card referred to this striking empirical regularity as being close to an 'empirical law of economics'. Nonetheless, reported elasticities do vary, even excluding outliers, between about - 0.5 and + 0.1. There is also considerable heterogeneity among wage curve studies in terms of data and model specification. This paper carries out meta-analytic techniques on a sample of 208 elasticities derived from the literature to uncover the reasons for the differences in empirical results across studies. Several causes of variation are identified. There is also clear evidence of downward publication bias. In addition, many reported t-statistics are biased upwards due to the use of aggregate unemployment rates. A maximum likelihood method and a trimming procedure are used to correct for these biases. Both methods give similar results for our sample. An unbiased estimate of the wage curve elasticity at the means of study characteristics is about - 0.07. Copyright Blackwell Publishers Ltd, 2005.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.blackwell-synergy.com/servlet/useragent?func=synergy&synergyAction=showTOC&journalCode=joes&volume=19&issue=3&year=2005&part=null
File Function: link to full text
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Wiley Blackwell in its journal Journal of Economic Surveys.

Volume (Year): 19 (2005)
Issue (Month): 3 (07)
Pages: 421-450

as
in new window

Handle: RePEc:bla:jecsur:v:19:y:2005:i:3:p:421-450
Contact details of provider: Web page: http://www.blackwellpublishing.com/journal.asp?ref=0950-0804

Order Information: Web: http://www.blackwellpublishing.com/subs.asp?ref=0950-0804

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Lawrence F. Katz & Olivier Blanchard, 1999. "Wage Dynamics: Reconciling Theory and Evidence," American Economic Review, American Economic Association, vol. 89(2), pages 69-74, May.
  2. Bell, Brian & Nickell, Stephen & Quintini, Glenda, 2002. "Wage equations, wage curves and all that," Labour Economics, Elsevier, vol. 9(3), pages 341-360, July.
  3. Abraham, Filip, 1996. "Regional adjustment and wage flexibility in the European Union," Regional Science and Urban Economics, Elsevier, vol. 26(1), pages 51-75, February.
  4. Lutz Bellmann & Uwe Blien, 2001. "Wage curve analyses of establishment data from western Germany," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 54(4), pages 851-863, July.
  5. John M. Abowd & David Card, 1986. "On the Covariance Structure of Earnings and Hours Changes," NBER Working Papers 1832, National Bureau of Economic Research, Inc.
  6. Kennedy, Steven & Borland, Jeff, 2000. "A Wage Curve for Australia?," Oxford Economic Papers, Oxford University Press, vol. 52(4), pages 774-803, October.
  7. Black, Angela J & FitzRoy, Felix R, 2000. "Earning Curves and Wage Curves," Scottish Journal of Political Economy, Scottish Economic Society, vol. 47(5), pages 471-86, November.
  8. Pannenberg, Markus & Schwarze, Johannes, 1998. "Labor market slack and the wage curve," Economics Letters, Elsevier, vol. 58(3), pages 351-354, March.
  9. Orley Ashenfelter & Colm Harmon & Hessel Oosterbeek, 1999. "A Review of Estimates of the Schooling/Earnings Relationship, with Tests for Publication Bias," Working Papers 804, Princeton University, Department of Economics, Industrial Relations Section..
  10. Blien, Uwe & Baltagi, Badi H. & Wolf, Katja, 2000. "The East German Wage Curve: 1993-1998," ERSA conference papers ersa00p196, European Regional Science Association.
  11. Martin Neil Baily, 1974. "Wages and Employment under Uncertain Demand," Review of Economic Studies, Oxford University Press, vol. 41(1), pages 37-50.
  12. Bratsberg, Bernt & Turunen, Jarkko, 1996. "Wage curve evidence from panel data," Economics Letters, Elsevier, vol. 51(3), pages 345-353, June.
  13. Groot Wim & Mekkelholt Eddie & Oosterbeek, Hessel, 1992. "Further evidence on the wage curve," Economics Letters, Elsevier, vol. 38(3), pages 355-359, March.
  14. V. Bhaskar & Ted To, 1996. "Minimum Wages for Ronald McDonald Monopsonies: A Theory of Monopsonistic Competition," Labor and Demography 9603001, EconWPA, revised 21 May 1996.
  15. Salop, Steven C, 1979. "A Model of the Natural Rate of Unemployment," American Economic Review, American Economic Association, vol. 69(1), pages 117-25, March.
  16. David G. Blanchflower & Andrew J. Oswald, 1995. "An Introduction to the Wage Curve," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 153-167, Summer.
  17. Lucifora Claudio & Origo Federica, 1999. "Alla ricerca della flessibilità: un'analisi della curva dei salari in Italia," Rivista italiana degli economisti, Società editrice il Mulino, issue 1, pages 3-36.
  18. David Neumark & William Wascher, 1996. "Is the Time-Series Evidence on Minimum Wage Effects Contaminated by Publication Bias?," NBER Working Papers 5631, National Bureau of Economic Research, Inc.
  19. Partridge, Mark D. & Rickman, Dan S., 1997. "Has the wage curve nullified the Harris-Todaro model? Further US evidence," Economics Letters, Elsevier, vol. 54(3), pages 277-282, July.
  20. Chris Doucouliagos, 1995. "Worker participation and productivity in labor-managed and participatory capitalist firms: A meta-analysis," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 49(1), pages 58-77, October.
  21. Tuomas Pekkarinen, 2001. "The wage curve : evidence from the Finnish metal industry panel data," Finnish Economic Papers, Finnish Economic Association, vol. 14(1), pages 51-60, Spring.
  22. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1, October.
  23. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-42, March.
  24. T.D. Stanley & Stephen B. Jarrell, 1998. "Gender Wage Discrimination Bias? A Meta-Regression Analysis," Journal of Human Resources, University of Wisconsin Press, vol. 33(4), pages 947-973.
  25. William M. Boal & Michael R. Ransom, 1997. "Monopsony in the Labor Market," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 86-112, March.
  26. Büttner, Thiess & Fitzenberger, Bernd, 1998. "Central wage bargaining and local wage flexibility: evidence from the entire wage distribution," ZEW Discussion Papers 98-39, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  27. Ashenfelter, O. & Harmon, C. & Oosterbeek, H., 1999. "A Review of Estimates of the Schooling/ Earnings Relationship, with tests for Publication Bias," Papers 99/20, College Dublin, Department of Political Economy-.
  28. Ipek Ilkkaracan & Raziye Selim, 2003. "The role of unemployment in wage determination: further evidence on the wage curve from Turkey," Applied Economics, Taylor & Francis Journals, vol. 35(14), pages 1589-1598.
  29. Robert E. Hall, 1972. "Turnover in the Labor Force," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 3(3), pages 709-764.
  30. Winter-Ebmer, Rudolf, 1996. "Wage curve, unemployment duration and compensating differentials," Labour Economics, Elsevier, vol. 3(4), pages 425-434, December.
  31. David G. Blanchflower & Andrew J. Oswald, 1989. "The Wage Curve," NBER Working Papers 3181, National Bureau of Economic Research, Inc.
    • Blanchflower, D. & Oswald, A., 1989. "The Wage Curve," Papers 340, London School of Economics - Centre for Labour Economics.
  32. Doucouliagos, Chris, 1997. "The Aggregate Demand for Labour in Australia: A Meta-analysis," Australian Economic Papers, Wiley Blackwell, vol. 36(69), pages 224-42, December.
  33. Robert A. Hart, 2003. "Overtime Working, The Phillips Curve And The Wage Curve: British Engineering, 1926-66," Manchester School, University of Manchester, vol. 71(2), pages 97-112, 03.
  34. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4 National Bureau of Economic Research, Inc.
  35. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  36. Stephen B. Jarrell & T. D. Stanley, 1990. "A Meta-Analysis of the Union-Nonunion Wage Gap," ILR Review, Cornell University, ILR School, vol. 44(1), pages 54-67, October.
  37. David Card, 1995. "The Wage Curve: A Review," Journal of Economic Literature, American Economic Association, vol. 33(2), pages 285-299, June.
  38. T. D. Stanley, 2001. "Wheat from Chaff: Meta-analysis as Quantitative Literature Review," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 131-150, Summer.
  39. Moulton, Brent R, 1990. "An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Unit," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 334-38, May.
  40. Bils, Mark J, 1985. "Real Wages over the Business Cycle: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 666-89, August.
  41. Chiarini, Bruno & Piselli, Paolo, 1997. "Wage Setting, Wage Curve and Phillips Curve: The Italian Evidence," Scottish Journal of Political Economy, Scottish Economic Society, vol. 44(5), pages 545-65, November.
  42. Montuenga, Victor & Garcia, Inmaculada & Fernandez, Melchor, 2003. "Wage flexibility: evidence from five EU countries based on the wage curve," Economics Letters, Elsevier, vol. 78(2), pages 169-174, February.
  43. Card, David & Krueger, Alan B, 1995. "Time-Series Minimum-Wage Studies: A Meta-analysis," American Economic Review, American Economic Association, vol. 85(2), pages 238-43, May.
  44. Blanchflower, David G., 2001. "Unemployment, Well-Being, and Wage Curves in Eastern and Central Europe," Journal of the Japanese and International Economies, Elsevier, vol. 15(4), pages 364-402, December.
  45. Reza, Ali M, 1978. "Geographical Differences in Earnings and Unemployment Rates," The Review of Economics and Statistics, MIT Press, vol. 60(2), pages 201-08, May.
  46. Arulampalam, Wiji & Hartog, Joop & MaCurdy, Tom & Theeuwes, Jules, 1997. "Replication and re-analysis," Labour Economics, Elsevier, vol. 4(2), pages 99-105, June.
  47. Kare Johansen, 1997. "The wage curve: convexity, kinks and composition effects," Applied Economics, Taylor & Francis Journals, vol. 29(1), pages 71-78.
  48. David Card & Dean Hyslop, 1996. "Does Inflation "Grease the Wheels of the Labor Market"?," NBER Working Papers 5538, National Bureau of Economic Research, Inc.
  49. Baltagi, Badi H. & Blien, Uwe, 1998. "The German wage curve: evidence from the IAB employment sample," Economics Letters, Elsevier, vol. 61(2), pages 135-142, November.
  50. Kerry Papps, 2001. "Investigating a Wage Curve for New Zealand," New Zealand Economic Papers, Taylor & Francis Journals, vol. 35(2), pages 218-239.
  51. Kare Johansen & Kristen Ringdal & Thortle Th�ring, 2001. "Firm profitability, regional unemployment and human capital in wage determination," Applied Economics, Taylor & Francis Journals, vol. 33(1), pages 113-121.
  52. Janssens, Stefan & Konings, Jozef, 1998. "One more wage curve: the case of Belgium," Economics Letters, Elsevier, vol. 60(2), pages 223-227, August.
  53. David G. Blanchflower & Andrew J. Oswald, 1994. "Estimating a Wage Curve for Britain 1973-1990," NBER Working Papers 4770, National Bureau of Economic Research, Inc.
  54. Sato, Yasuhiro, 2000. "Search theory and the wage curve," Economics Letters, Elsevier, vol. 66(1), pages 93-98, January.
  55. Blanchflower, David G & Oswald, Andrew J, 1994. "Estimating a Wage Curve for Britain: 1973-90," Economic Journal, Royal Economic Society, vol. 104(426), pages 1025-43, September.
  56. Wagner, Joachim, 1994. "German wage curves, 1979-1990," Economics Letters, Elsevier, vol. 44(3), pages 307-311.
  57. David Card, 1995. "The Wage Curve: A Review," Working Papers 722, Princeton University, Department of Economics, Industrial Relations Section..
  58. Robert E. Hall, 1970. "Why Is the Unemployment Rate So High at Full Employment?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 1(3), pages 369-410.
  59. Azariadis, Costas, 1975. "Implicit Contracts and Underemployment Equilibria," Journal of Political Economy, University of Chicago Press, vol. 83(6), pages 1183-1202, December.
  60. Campbell, Carl & Orszag, J. Michael, 1998. "A model of the wage curve," Economics Letters, Elsevier, vol. 59(1), pages 119-125, April.
  61. Blackaby, David H & Hunt, Lester C, 1992. "The "Wage Curve" and Long-term Unemployment: A Cautionary Note," The Manchester School of Economic & Social Studies, University of Manchester, vol. 60(4), pages 419-28, December.
  62. Groot, Wim & Maassen van den Brink, Henriette, 2000. "Overeducation in the labor market: a meta-analysis," Economics of Education Review, Elsevier, vol. 19(2), pages 149-158, April.
Full references (including those not matched with items on IDEAS)

This item is featured on the following reading lists or Wikipedia pages:

  1. Meta-Analysis in Economics

When requesting a correction, please mention this item's handle: RePEc:bla:jecsur:v:19:y:2005:i:3:p:421-450. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)

or (Christopher F. Baum)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.